I live abroad – can I still get a UK mortgage?
Offshoreonline, the UK based specialist expatriate and international mortgage broker, point out that the range of lenders offering products for the expat mortgage market is small and that within this group, lenders will also pick and choose where they will take clients from. Often, the countries where lenders cannot help are obvious – people resident in Iraq, for example, would almost certainly not be able to find a lender, at least not at normal market rates, nor would they in countries where sanctions are in force, such as Iran.
Other locations where it can be difficult to obtain a mortgage may be more of a surprise. Offshoreonline’s spokesman Guy Stephenson comments, “ Australia, a frequent destination for expats, is off the approved list for several lenders, as is South Africa, another common destination and Singapore too, again popular, so it pays to check first with lenders before putting in an offer.”
Can I get an expat mortgage without a salary?
Another common problem can be where expats are self-employed. Offshoreonline point out that banks will often ask for three years of accounts, with these having been prepared by a recognised international accounting firm or at least one which is part of a global association. They point out that if you live in Dubai or elsewhere in the Middle East, for example, by and large, these are tax free countries, so there is no need to submit a tax return and therefore people think no need to retain the services of an accountant. Equally, you will not be able to fall back on local tax returns, as there are none to submit, so proving income becomes problematic.
Contract workers may also have to clear a number of hurdles – lenders will want to see evidence that a contract has been renewed at least once, in many cases, or has a certain length of time still to run, usually over six months.
How much can I borrow?
Offshoreonline say that lenders will underwrite loans using several different approaches, but broadly these fit into three categories – affordability, on the basis of rental income or a mixture of these. The UK regulator has set strict rules that lenders have to follow to ensure loans are affordable and safe for both parties, the borrower and the lender. Some lenders will apply regulatory stress testing rules at the highest levels, insisting on high levels of rental income to cover the cost of the mortgage interest. This has the effect of reducing the possible loan size as a percentage of the sale price, often to below 65% for rural properties where rental yields may be very low, so making the purchase more difficult. In these circumstances, clients may need to look at different lenders with different rules, which may mean paying higher interest rates.
If your main income is earned overseas the lender will need to consider the impact of fluctuating exchange rates. They may adjust their calculation of affordability by assessing the impact of a significant movement in exchange rates to protect themselves against you not being able to pay if the currency you earn suddenly weakens. The mortgage provider may also have difficulty in identifying your employer if they are based abroad. Money Expert advise that the difficulty in getting hold of all of the relevant information, coupled with the risk of fraud that comes with it, lead many mortgage lenders to flat out refuse expats, or to at least charge higher rates to those they do lend to.
Your credit rating can also be affected by being an expat as it can be difficult to trace the credit history of expats who have lived abroad for a prolonged period of time. This does not necessarily disqualify you as a candidate to lend to, but it can lead to lenders being more cautious as you are more of an unknown quantity.
Offshoreonline advise that having navigated the hurdles of geography and income, expat property purchase remains popular, both as an investment in its own right and potential pension vehicle, with mortgage rates from 2.84% and two year fixed rate deals at 3.19% readily available.